iPhone 'Mini' will hit stores in six months: analyst

Budget iPhone tipped for mid-2013.

A smaller iPhone aimed at budget shoppers could be just around the corner, according to leading industry analysts interviewed by CRN.

Mobility analysts from Telsyte, Strategy Analytics, Topeka Capital Markets and Jefferies & Co are in agreement that a midrange iPhone -- speculatively titled the 'iPhone Mini' -- is almost certainly in the pipeline as Apple looks to combat cheaper offerings from Android manufacturers.

Depending on who you ask, the estimated timeframe for the new device ranges from mid-2013 to 2016.

Topeka Markets analyst Brian White believes a smaller, low-cost iPhone could land as early as June this year. He also predicts the device will come in a variety of different colours.

"The next iPhone [will offer] different screen sizes that we believe will allow Apple to better bifurcate the market and expand its reach," White wrote in a research report published last week.

"This eventually opens up the possibility for a lower-priced iPhone (i.e., iPhone mini) with a smaller screen size."

These claims were echoed by an earlier research report from Jefferies' analyst Peter Misek, which implies a low-cost iPhone is awaiting production approval from Apple.

"Our checks indicate that the next iPhone will have more choices for customers," Misek said in his report.

"This entails an expansion in both the colour patterns and screen sizes with the next iPhone that we currently believe will be launched in May/June with certain supply production starting in March/April."

Strategy Analytics was more conservative.

"The iPhone 5 is growing fast and profitably right now, so there is little incentive for Apple to launch an 'iPhone Mini' this year," Neil Mawston, executive director at Strategy Analytics, said in an email interview with Reuters.

"We think Apple will have to launch an 'iPhone Mini' at some point over the next three years."

The case for mini

Telsyte research director Foad Fadaghi, meanwhile, is betting on a cheaper iPhone device in the first half of the year.

"For Apple to be effective in this segment it needs to come to market soon with a Mini or other similar type product," Fadaghi told CRN.

"It probably can't wait around too long because the Android players in that space are moving very quickly and are taking up a lot of market share.

“The opportunity is really right now – I'd assume within the next six months we will probably see some sort of lower-cost iPhone model available."

Apple is looking to revaluate its lower-end sales strategy, Fadaghi continued, in a bid to grab more market share, which is where the iPhone Mini comes in.

"Apple is being adaptive to market conditions and is addressing the opportunity outside the premium market," he explained.

"In the past, Apple has tried to address that market with older models at lower prices, such as the iPhone 3G. But that strategy probably has to be adjusted."

Any shortfalls in hardware margins could be offset by gains in sales of digital content, he said.

"Apple makes a lot of money from selling digital content; the more users it has, the better opportunity it has to make revenue from apps and also retain developers and the other ecosystem players it's built up over the years."

According to Fadaghi, an attractively priced iPhone would not necessarily cannibalise sales of Apple's premium smartphone offerings.

"I don’t think Apple is at risk of losing market share by bringing out a downmarket product. It's proven it can do that successfully in other markets, such as tablets with the iPad Mini and MP3 players with the iPod Nano. So it already has experience addressing different market segments with different products."

Fadaghi said he expected the device to be in the "$200-$300 price category" in the US, and "maybe $100 more" in Australia.

"This pricing is typical of what you'd expect from a budget-conscious smartphone."

Fadaghi said the device would be unlikely to carry premium features such as a large screen, 4G or high capacity storage, which would help Apple to keep manufacturing costs down.

"If some of those costs can be taken out, you can begin to approach the pre-paid market as well as the direct product market which [Apple] can sell through its own stores."

Last week, application developers discovered references to a new iPhone identifier, iPhone 6.1, running iOS 7 operating system, in their app usage logs, lending credence to rumours of a new model. Whether it will be a budget-friendly device remains to be seen.

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